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 Wednesday, 29 January, 2003, 17:58 GMT
Bolivia textiles firms fear lost opportunity
Textile manufacturer in Bolivia
Big firms are likely to get bigger, thanks to tax breaks

When Bolivia, Colombia, Ecuador and Peru signed a new trade agreement with the US last year, the big prize was duty-free access to the huge US textiles market.

The government has opened the door to the US market, but unless they back this up no small producer will be able to cross the threshold

Lourdes Millares
MP, Sucre
In Bolivia, a country with over 2,000 years of textile history and more than a million skilled textiles workers, the new deal has raised high hopes.

But analysts claim the only beneficiaries will be large firms, while the sector's biggest employers - small producers - will miss the boat.

The new four-year deal, known as the Andean Pact Trade and Drug Enforcement Agreement (APTDEA), wipes out 20% import tariffs on garments made from natural fibres and 35% on synthetics.

It offers a timely boost to Bolivia's textiles industry, which has been in decline ever since the land-locked nation opened the door to foreign competition by slashing import duties over a decade ago.

Government optimistic

During the last four-years of economic crisis the situation has got worse.

Bolivian ladies sewing
Small producers are at risk of missing the boat
Imported second-hand clothes have flooded the national clothing market, while exporters suffered from the slump in US demand following 11 September.

"APTDEA is a great opportunity for Bolivia," said Foreign Trade Minister Juan Carlos Virreira.

He believes the zero-tariff will give Bolivia a critical edge in what is one of the world's most competitive industries, creating important new employment opportunities.

The government hopes to attract foreign investment by providing tax-free industrial parks where companies can set up operations, importing US fabrics, producing the garments and then re-exporting them to the US.

Prioritising Nationals

But local firms argue the focus should be on reviving the national industry.

"The government is looking at new projects that will take time to start," says Jimmy Apt, vice president of Ametex, the firm that accounts for over 90% of all Bolivian textile exports.

"But there is excess production capacity all over the place that could be up and running in only six months."

Bolivia textiles
Bolivia is known for its colourful fabrics
Mr Apt estimates that even selling at a very low price the unused production capacity could boost textiles exports from the current $30mn annual figure to over $200mn.

Such growth would also create around 10,000 new jobs.

Ametex has been successfully exporting into the US for a decade.

The company expects to double production in the next year with the advantage APTDEA has given.

It is an example of what Bolivia's other large companies could do if they can find the fresh capital injection needed to start working again.

On the shelf

But there are another 50,000 small and micro companies who look likely to be left on the shelf.

At busy times of the year these companies employ over half a million Bolivians, but they are simply not in conditions to be able to export directly.

If the government waits for investment to arrive from China the opportunity will be lost

Jimmy Apt
Ametex
As part of the informal economy these small producers do not meet health and safety and employment conditions required by APTDEA.

"The costs involved are too great," said La Paz producer Eleuterio Gomez. "It is as much as we can do to keep up with annual 40% interest rates on our loans from micro credit firms."

Small producer associations around Bolivia are now working to create an inventory of all the companies and their equipment so they can show on paper the actual production potential of the sector.

The aim is to combine the machinery and manpower to be able to produce larger quantities in an environment where the necessary quality controls can be applied.

But for this to be a success the small producers will need low cost credit to modernise technology, and access to large, safe working environments. In both cases they will depend on the State taking the lead.

"The government has opened the door to the US market," said Lourdes Millares, a local MP from Bolivia's legal capital Sucre.

"But unless they back this up no small producer will be able to cross the threshold."

Time to act

All the time the clock is ticking. The APTDEA agreement is only valid for four years when it is due to be replaced by the Free Trade Area of the Americas (FTAA), and already four months have passed.

"The four year advantage we have is critical if the industry is to become competitive enough to survive in a free trade zone," said Jimmy Apt.

"If the government waits for investment to arrive from China the opportunity will be lost."

See also:

08 Aug 02 | Business
05 Dec 02 | Business
04 Oct 02 | Business
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